October 4, 2016

Globalism versus Free Trade versus the Trump Train

I've always been a fan of free trade; it's a core conservative principal. So you might wonder why so many people who favor free trade seem to be behind Donald Trump and his seemingly protectionist rhetoric (myself included).  The answer is pretty simple. Free Trade and Globalism are not the same thing.

Globalization, as it relates to free market neoliberalism can be defined as follows, although this is hardly the only definition;
Neoliberalism refers primarily to the 20th century resurgence of 19th century ideas associated with laissez-faire economic liberalism. These include extensive economic liberalization policies such as privatization, fiscal austerity, deregulation, free trade, and reductions in government spending in order to enhance the role of the private sector in the economy.
Therein lies the problem. Each of those policies mentioned have been applied only in part. There is the obvious, often noted imbalance of open markets between countries wherein free access to consumers in America by producers in China, Japan and other nations are not reciprocated fairly by those nations through duties, tariffs, and legal obstruction. But there are other incomplete applications of the free market, quite often as they relate to labor.

Labor (including intellectual labor) is the one asset that any human has that they can offer. In free markets, companies in different countries can offer their goods and services for sale in most any country in the world. For the most part, laborers are not - they are confined to do business in the country of their habitation, most often that is, the country of their birth. Relocation is difficult, challenging and not always a simple matter to do legally. So as a supplier of labor, people do not have the free market to supply the way they do to consume. Even if the rules were simplified to allow anyone access to any country for citizenship (hardly a reasonable idea), people would often lack the economic means to take advantage of the opportunity. While this mat change in time with the advent of virtual workspaces, it is not even the norm in industrial or postindustrial nations let alone underdeveloped regions like sub-Saharan Africa or Bangladesh. So the people are forced to partake of the free market as consumers but produce in a not truly free market as a supplier of labor. That leaves the advantage to the largest companies capable of producing where labor is cheap and selling where demand is strong at higher prices. This does not benefit the suppliers of labor or in the long term the purchasers of those goods and services who increasingly see their jobs offshored to cheaper suppliers. Soon their ability to continue purchasing at those higher prices will fall away as well. They cannot produce at the same prices as cheaper overseas labor and will not have the mobility to sell everything, move to Bangladesh and work in a sweatshop garment factory at impossibly low wages. And why would they want to do so?

The solution in part it would seem is to free up the labor market from artificial barriers. Since the rise of terrorism, there's a practicality question but that does not mean that nothing can be done. Right to Work states have seen job growth while overly union-friendly states have seen the opposite. Minimum wage laws and mandatory benefits attract illegal immigrants to jobs most Americans do not want to do, and also forbid labor suppliers from offering their skills at whatever pay the want. Of course there's an argument to driving wages in America down to the level of those in Bangladesh, but at those wages Americans would become a nation of impoverished workers and no longer be a market for the goods they are manufacturing.

The answer is a happy medium. Laws that encourage business ownership over the oligopoly that the industrialized world seems increasingly headed towards need to strike a balance between benefiting labor and benefiting business. More businesses , small businesses, free from onerous government burdens and red tape, mean more variety. They mean less homogeneity in product and service offerings and a greater chance that someone will succeed and be copied.

Ultimately that's the cycle that needs to be reinvigorated - the growth of small businesses into larger ones as they succeed and the culling of the poor ones. The free market does that very efficiently, better than any government ever has or ever will. I know to many progressives it's scary because it's not managed in the direction that they'd like to see society head. But who are they to dictate where society should head? I know society has taken a lot of turns I think are ludicrous, but I am not trying mandate society be like me. The idea is even more ridiculous than kids wearing jeans with their underwear and/or butts sticking out.

Circling back to Trump, I am still in favor of free trade. But I am not in favor of free trade at the expense of self interest. Free trade in itself is no holy grail - free trade is ultimately built on the notion that self-interest serves everyone better than any other idea could. Free trade is, or should be, built on the notion that a rising tide raises all boats. So free trade pursued for free trade itself, or for the benefit of a few at the expense of many is a twisted revision of free trade that I cannot support. That is what globalism has become. It certainly has nothing to do with classic neo-liberalism. Donald Trump, riding a wave of frustrated and angry populism is at least arguing that the status quo does not work for far more people than it does work for and should be blown up and reset, more intelligently. Better deals are not a bad thing. Smarter laws are not a bad thing. Crippling red tape cannot continue either. This is why Donald Trump voices the frustration of so many people, not because he says terrible things about Rosie O'Donnell. That can be forgiven because it makes clear he speaks his mind, and on the economy, he's think what millions of other people are thinking too. That's why he might very well win this thing.
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